Posted on July 11th, 2019
Below is a FULL TRANSCRIPT of the Video
Tommy:
Can you tell us about demand letters?
John:
Well, there’s different types of demand letters. There’s what I call the legit demand letters, which are, “Hey. We have evidence that you’ve done all of these things wrong. Let’s talk about settling this before we have to file a lawsuit, right?”
And that’s usually … they already have wage statements or whatever it is that tells them the employer’s done something wrong. Then there’s the ones that are suspect to me, always, which is, “Hey. We represent this particular X employee, or employer, or current employee, and we want you to give us all of the records related to this employee. Time records, pay records.”
Those are basically phishing. “Let me see if I can find something you’ve done wrong so I can force you to pay me some money to go away.”
And what you should do is, first of all, just contact a lawyer. And it really just depends.
There are some law firms that are legit law firms. Like I know that they’re not taking crap cases, that they have something legitimate before they take them. I also know which law firms will likely … most of them, I don’t know everybody, but most of the guys.
I know which ones will sue. And there’s some that send you a demand letter, and sue when you don’t give them the right response. There’s some that you know will never sue, they’re just constantly sending you more demand letters. So with those, we always just basically string them along.
The ones that we know will sue, we try to work it out with them. And then there’s some that sue without a demand letter, you just get a lawsuit.
So there are guys like that too. So when you get a demand letter, read it, forward it onto whoever’s representing you, and then let them take care of it from there.
Tommy:
Got it. That’s definitely a really good area to seek good legal counsel immediately.
John:
Yeah. And it’s the beginning of what is potentially a lawsuit. So what I always say is, try to avoid the lawsuits at all costs because they’ll likely cost you more money.
And on top of that, you’re going to be spending a year, year and a half with sleepless nights wondering if someone’s going to attack your bank accounts.
And of course they can’t without a judgment. But I mean you know most people don’t know that, right?
So it’s almost like when you’re a kid, right? When you’re a kid … I don’t know if most women would get this, but most guys would understand this. It’s like when the guy tells you, “Hey. I’m going to meet you outside at three, and we’re going to get into a fight.”
That’s really what litigation is. So anything you can do before three o’clock to avoid getting into that fight is what you should do. Whether it’s apologizing, whether it’s … whatever it is, right?
So that’s why the demand letters is like that first threat of, potentially, there’s going to be a fight at three o’clock after school, right?
And so then it’s up to you to try to figure out what to do to get out of it. And a lot of times it’s just paying some money.
And I understand that people say, “Well that’s not right. That’s not fair. I’d rather fight. I’m not paying a nickel.” That’s cool. We can do it that way too. But just understand, at three o’clock, you’re going to be in a fight.
Tommy:
Yeah, yeah. No, it’s unfortunate. That’s really unfortunate that good, honest business owners can get into trouble without really doing anything wrong.
John:
Yeah. And I hate to get political here, but it’s just over-regulation, right? Every time you add something new into your own business, it creates a whole slew of other problems.
But as a business owner, you can see it, and you can rectify it or do whatever. Government is not like that. It’s big, and it takes years to figure out what the result of doing anything is. So I’m not saying that the laws are not there for a good reason.
But what I’m saying is, they may not have been thought through very well because the result of it is a lot of additional lawsuits. That drives businesses out of California, so it hurts the tax base.
Clogs up the courts, so it creates more cost and expense to the government. It’s just all of these things. There’s tons of stuff like that, right?
I’ve been reading about the school loan industry, you know what I mean? The government decided to regulate … not regulate, but back school loans, which then increased the cost of tuition. And then the only ones that made out were colleges.
By increasing tuition and setting up degrees that have no … that nobody will pay you for once you get out of it, right? So now you’ve got all these people in debt, you’ve got the government backing these things, and then you’ve got the universities walking away with all this money.
It’s very similar to employment law, right? So you’ve got the governments, that it’s costing them more money because of these laws.
Then you’ve got business owners, that it’s costing them money, so they’re leaving. And then you’ve got these attorneys on the other side that are just making these windfalls.
And I’m not saying that every case is a bad case. Sometimes employers do stuff wrong, it’s just … And there are lots of attorneys doing good work out there, but there are enough bad attorneys that are just shake down guys, that it really hurts the system. And not everybody’s honest, that’s just the bottom line.
Tommy:
Yeah. You made a really good point in your previous videos about severance packages, and why it’s good to have a severance package even if it’s to an employee that really doesn’t deserve one. Can you elaborate on that?
John:
Yeah. You know what’s funny about all relationships with human beings? I’ve come to notice from having girlfriends, and brothers and sisters, and whatever else is everybody overestimates their own value and underestimates the other person’s value.
That’s just human nature, right? So even bad employees think they’re good employees, believe it or not. I mean there’s some that are reasonable and realistic, but most of them don’t even realize that they’re bad employees.
And there are things that employees do at work that they wouldn’t even do at home, which is funny to me.
So anytime you fire someone, their initial reaction is always, “I’m going to get you back,” or, “I’ve got rights too.” Because people think they deserve this or that they’ve given so much to this company, they don’t realize that at the lowest level of this is just an exchange.
I’m basically willing to pay you this much money in exchange for your time and skills, and you’re willing to accept that much money for that.
But sometimes it’s just not a good fit, right? But that’s not how humans react to it. They don’t react like robots, obviously. So you can’t just turn them off.
And the climate in California is such that, even if you didn’t do anything wrong, it’s going to cost you so much money to prove you didn’t do something wrong.
It makes sense just to have a severance agreement. And a severance agreement is simple. It’s just saying, “Hey. This isn’t working out, right? I’m not going to go after you for anything … And sometimes the employees have done something wrong, sometimes they haven’t.
Sometimes they’re just bad employees, and you can’t sue them for that. But sometimes they’ve embezzled, sometimes they’ve stolen things. Who knows what, right?
So with a severance agreement, you say, “I’m not going to sue you, you’re not going to sue me for anything, and on top of that, I’m going to give you either two weeks or a month’s pay,” or whatever it is, whatever you guys decide on.
And on top of that, they can try to collect unemployment or whatever. That’s not up to you whether they get it or not. So with a severance agreement, sure, you might end up paying a few thousand dollars. Even on a high-level employee, let’s say it cost you $5000 for two weeks. If you get a lawsuit, just the retainer alone is going to be 10.
So already you’ve doubled your injury, you’ve doubled what you’ve paid for a severance. And that’s not even counting however long this lawsuit takes.
And remember, people can sue for anything. So with $5000, you’ve paid something, there’s a tax deduction on it. And on top of that, you have the peace of mind, “Okay. I don’t have any problems with this employee.”
So I always recommend to my clients, if there’s even … if you’re terminating anybody or laying them off, do a severance if you can. If it’s somebody that’s like, “Hey. You know I’m leaving because I’m moving out of state or I decided to go back to school,” you don’t have to give them a severance typically.
Chances of them coming back at you is probably fairly small. But anybody else is just worth it. Just write it off on your taxes. Yeah. Pay that guy the 5K instead of the government.
Tommy:
That is invaluable advice right there. And there was one video that I [inaudible 00:09:39], that a light bulb went on. That, hey, getting good legal advice [inaudible 00:09:44] you don’t really read anywhere else, you know?
John:
Yeah.
Tommy:
It takes years of experience. So the restaurant industry is unique in that there’s a large employee base with a lot of turnover.
From your experience, what are the common areas that restaurants get themselves in trouble with, with respect to employment law?
John:
Oh restaurants. What a tough business. You know what movie I was watching a couple of weeks ago. It’s a great movie, I’ve seen it maybe three times, Waiting… Do you know that movie?
Tommy:
Never heard of it.
It’s with Ryan Reynolds before he was famous. And it’s about a restaurant that’s kind of like a TGI Fridays.
Like these guys all work together, they fool around, they date each other, they party with each other after work or whatever. And I’m watching this, and I hadn’t seen it in years. And I was watching it, and I was like, “Oh man, look at all that liability in a restaurant.”
And this particular movie was written by this guy, I can’t remember his name, but it was based on his experience in the restaurant industry when he was … I think he was living in LA trying to be a writer, and then he wrote this script because it was so interesting.
Restaurants have just a ton of liability, just a ton. And it’s great, there’s lots of restaurants. But I don’t know.
I just don’t know why people open restaurants. Maybe if you’re a chef or something, it’s … But man, there’s just so much liability in a restaurant. The biggest liability is sexual harassment, especially if it’s a bar sort of restaurant, right?
Especially in LA, you’ve got all these young, good looking people that are going to be actors one day, that are drinking and partying and working together, and they get very familiar with each other. Imagine a third of your life is spent with these people. You get close to them very quickly.
So it doesn’t take much for a sexual harassment claim, for a … any type of harassment claim. Because people get to know each other, they start joking around with each other.
I did a video on a … and this wasn’t my case, it was one of my friends who is in-house counsel at a big company that was saying, in the kitchen, it was a bunch of young Latinos using the N-word because that’s … in our culture these days, it’s … everybody’s using that word I guess because of music and whatever else.
And they were Spanish speaking. All in the kitchen, all Latinos, all Spanish speaking, using the N-word as they joked around with each other.
And one of the wait staff was a young African American woman. And she got fired for something completely different, but then came back and sued based on harassment, even though she had never complained about it or anything else.
And it’s easy to prove that they were using that word, the video’s there, right? So of course the employer’s liable for this.
The other big one with restaurants is wage and hour stuff because they don’t want to take their 10 minute breaks because it’s too busy.
Well, then that’s the employer’s fault because they didn’t have enough staff. Missed lunch breaks. Sometimes it’s just too busy, and they’ve got to take a lunch break. Swing shifts … not swing shifts. Split shifts are another big one.
Most people don’t realize that you have to pay for an extra hour for split shifts. And so that becomes liable … There’s just so much. And then on top of that, all the worker’s comp claims that come out of restaurants.
Restaurants are tough. It’s a tough business to be in. And I’m sure those guys do it for the love, not for the money because I don’t know how else you would get into that business.
Very low margins, and lots and lots of risk. But there are ways around it too, you know?
Tommy:
Yeah. So you mentioned sexual harassment. What can employers do to protect themselves from something like that?
I mean they’re not involved, there weren’t any complaints. Are there any policies that they can have, training available, that can reduce the risk of something bad happening?
John:
Well, it starts with training the supervisors or anybody that’s in management, right? First of all, they should be trained in what is and what isn’t.
Second of all, they should be setting a really good example, and not joking around and potentially … excuse me, being part of that harassment.
And then third, enforcing it. So just like, “Hey. Don’t joke around like that.” Or, “Hey. Don’t use that word.” Or, “Hey. That’s not what we do here. Hey. I know you guys are dating, but in the workplace, no touching or whatever.” But that’s probably the best ways.
Training management is important for several reasons. First of all, to kind of enforce the rules. But second of all, because there’s strict liability for management.
So if you’re in a supervisory position, and let’s say you were hitting on someone that was below you, they don’t even have to complain. They don’t have to say, “Hey. This guy is hitting on me.” There’s automatic liability.
Whereas if they’re at the same level, and they didn’t complain, then it’s questionable whether there’s liability or not.
I mean you probably still have to settle, just because of the expense. But at least the argument would be that, “She never complained about anything,” or, “He never complained about anything.
We didn’t know about this.” Then the liability considerably diminishes, unless of course … they’ll be arguing, “Yes. We told this supervisor,” or, “We did this,” or, “We couldn’t because of whatever reason.”
But it makes it tougher to have a sexual harassment claim.” So I think the key is the supervisors.
California law requires training now anyway for sexual harassment, annually, starting … I think they have to finish up by January 1, 2020. And so I think you start with the supervisors, you make it very clear what’s acceptable and what’s not acceptable.
And then I think you [inaudible 00:16:23] sexual harassment, I think you have insurance. There’s EPLI insurance that covers things like harassment, discrimination, things like that. And then EPLI doesn’t generally cover wage and hour stuff.
So the wage and hour stuff, you just got to be on top of it.
